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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> The Electric Construction Co., Ltd v. Hurry & Young [1897] ScotLR 34_295 (14 January 1897) URL: http://www.bailii.org/scot/cases/ScotCS/1897/34SLR0295.html Cite as: [1897] ScotLR 34_295, (1897) 24R 312, [1897] SLR 34_295 |
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The purchaser of a dynamo made complaints of its working, but continued to use it for a period of seven months, at the end of which he wrote instructing the seller to remove the machine, in terms which amounted to a rejection of it. He continued, however, to use it for three more months, when the seller raised an action for recovery of the price.
The Court, after a proof, found that the dynamo was disconform to contract, but held ( rev. the judgment of Lord Low) (1) that the purchaser had forfeited his right of rejection; (2) ( diss. Lord Kinnear) that having elected to exercise his right of rejection under section 11, sub-section 2, of the Sale of Goods Act 1893, he was not entitled to recal his election and adopt the alternative remedy of a claim for damages in respect of breach of warranty, as provided by section 53 of that Act.
Opinion ( per Lord Kinnear) contra, that the purchaser's election to reject having in no way prejudiced the seller's position, the purchaser was entitled, on the failure of his rejection, to adopt the alternative remedy provided by the statute, viz., a claim for damages.
Subject_Process — Expenses — Partial Success.
The defender in an action in which the Court had granted decree in terms of the conclusions of the summons, and had made a general finding of expenses against him, on the motion being made for approval of the Auditor's report, objected, on the ground that the Auditor had included the expenses of a proof in which the defender had been successful though unsuccessful in the action.
Held that the objection was made too late. Murray v. Macfarlane's Trustees, November 6, 1895, 23 R. 81, followed.
This was an action at the instance of the Electric Construction Company, Limited, London, against Messrs Hurry & Young, electrical engineers, Edinburgh, concluding for payment of £50, being the price of a dynamo erected by the pursuers, on the order of the defenders, in the shop of a customer of the latter.
After certain preliminary correspondence the defenders ordered the machine in a letter dated 22nd September 1894, in the following terms:—“Please supply us with the following: One No. 3 dynamo giving 115 volts, 40 ampères, at approximately 400 revolutions, with extra bearing and slides for tightening belt, and also balance-wheel about 1 cwt. (compound wound) as per quotation, £57, 16s., of the 10th and 13th September.” …
The dynamo was duly forwarded to the defenders, and was received by them on 11th October, and was put up in the shop of Messrs Latimer, Lothian Road, for whom it had been ordered. Complaints having been made by them as to the working of the machine, the pursuers on 20th December agreed to supply a new one in its place, and in February 1895 they sent a new dynamo. In consequence of complaints as to its working, a new armature was supplied by the pursuers.
Messrs Latimer continued to make complaints as to the working of the dynamo on the ground that after it had been at work for some hours there was an excessive fall in voltage, with the result that the lights in the shop and premises gradually lost brilliancy, and after a few hours were quite insufficient for their purpose.
The pursuers sent down a representative to test the working, and suggested various expedients for keeping up the voltage. A correspondence followed, Messrs Latimer continuing to use the machine, till on the 14th September the defenders wrote to the pursuers stating that “if you cannot make the machine work without a loss of more than 4 volts you will have to remove it, as both Messrs Latimer and ourselves are satisfied that the machine is not right. You may take what action you care to, and we will do our best to defend ourselves in the matter.”
The pursuers did not remove the machine, and on the defenders refusing to pay the contract price, on 18th December 1895 raised the present action. Messrs Latimer continued to use the machine.
The pursuers averred (Cond. 5)—“The defenders have retained the said dynamo for a period of nearly a year after the pursuers intimated to them that they maintained that same was in accordance with the contract, and they are not now entitled to reject or to refuse to pay the contract price.”
The defenders maintained that by the pursuers' failure to supply a dynamo conform to contract, and by delivery of which
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the defenders could implement their contract with Messrs Latimer, they had suffered damage to the extent of £500. They pleaded—“(2) The pursuers having failed to implement the contract between them and the defenders, the price of which is sued for, by delivering a dynamo conform to the defenders' order, the defenders are not liable in payment of said price, and should be assoilzied from the conclusions of the action. (3) The defenders having suffered loss and damage to an extent greatly exceeding the sum sued for in consequence of the pursuers' failure to implement their contract as aforesaid, are entitled to absolvitor.”
The
Lord Ordinary (Low) allowed parties a proof.The result of the proof, as indicated in the opinions of the Lord Ordinary, and of Lord M'Laren and Lord Kinnear, was to show that the fall in voltage of the dynamo was excessive, and that accordingly the machine was not conform to contract.
The Lord Ordinary on 18th June issued an interlocutor by which he sustained the second aud third pleas of the defenders, and assoilzied them from the conclusions of the action.
His Lordship, after examining the evidence, proceeded as follows:—“I have therefore come to the conclusion that the dynamo was not conform to contract.
The next question is, whether it is still open to the defenders to refuse payment of the contract price. As the law stood prior to the Sale of Goods Act 1893, I think that it is extremely doubtful whether, in the circumstances which have occurred, the defenders could have pleaded breach of contract to the effect of resisting a claim for the price.
The defenders, no doubt, all along objected to the dynamo, and called upon the pursuers to make it right, and finally they told the pursuers that if they could not make it work without a fall of more than 4 volts they must remove it. The pursuers did not remove it, and it has continued to be worked in Messrs Latimer's shop until the present time. Under the old law I think that the defenders would have put themselves in the wrong by continuing to work the dynamo. When it became apparent that the pursuers would not or could not put it right, I think that it would have been incumbent upon the defenders to replace it as soon as possible, and either to return it to the pursuers or to put it in safe keeping at their risk.
But the Sale of Goods Act has made an important alteration upon the law. A buyer is no longer bound to reject or return goods which are disconform to contract, and to repudiate the contarct, but if he has not expressly or by implication accepted the goods, he can retain them and claim damages, or set up the breach in diminution or extinction of the price.
That I take to be the effect of the 11th, 35th, 53rd, and 62nd sections of the Act.
By section 11 (2) it is provided that in Scotland ‘failure by the seller to perform any material part of the contract of sale is a breach of contract which entitles the buyer either within a reasonable time after delivery to reject the goods and treat the contract as repudiated, or to retain the goods and treat the failure to perform such material part as a breach which may give rise to a claim for compensation or damages.’
The buyer's remedies are further specified in section 53. It is there, inter alia, provided that, ‘Where there is a breach of warranty by the seller, the buyer may (a) set up against the seller the breach of warranty in diminution or extinction of the price.’
By the 62nd section it is enacted that ‘As regards Scotland a breach of warranty shall be deemed to be a failure to perform a material part of the contract.’
Now, I think that if the construction which I have put upon the contract between the pursuers and the defenders is sound, there was a failure to perform a material part of the contract, and that the defenders were entitled to retain the goods and treat the failure as a breach of warranty entitling them to diminution or extinction of the price.
The pursuers founded upon the 35th section, and argued that the defenders must be held to have accepted the goods, and could not now either reject them or resist an action for payment of the price.
The 35th section provides that the buyer is deemed to have accepted the goods (1) when he intimates to the seller that he has accepted them; (2) ‘when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller;’ and (3) when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them.
It was admitted that the defenders were not in the first or third of these positions, but it was argued that by continuing to use the dynamo they had acted in a way inconsistent with the ownership of the seller. I am of opinion that the argument is untenable. The right to retain given by the Act involves the right to use, and use would only imply acceptance if there had been no timeous rejection of the goods. In this case I think that there was timeous rejection of the goods. The defenders from the first complained that the dynamo was not conform to contract, and when it became apparent that the pursuers could not put it right, the defenders told them that they might remove it. That, in my opinion, was rejection within the meaning of the Act.
I am therefore of opinion that the defenders are entitled to set up the breach of contract as in extinction or diminution of the price.”
The pursuers reclaimed, and argued—(1) The contract had not been broken, there being no ground for inserting in it an implied warranty that the voltage was not to vary more than 3 or 4 per cent. This was a sale of a specific article to which section 14, sub-section 2, of the Sale of Goods Act 1893 applied, excluding the notion of such an
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implied warranty. (2) But in any view the defenders, by their having used the machine, were barred from rejecting it at the end of so long a time after its delivery. That was undoubtedly the rule of common law— Chapman v. Couston, Thomson, & Company, March 10, 1871, 9 Macph. 675; Croan v. Vallance, May 18, 1881, 8 R. 700. The 1893 Act was merely a codifying statute, and the rule of common law prevailed where not expressly altered. Section 36 was simply a statement of the old law, viz., that a rejecting purchaser was not bound to return the goods, but if he used them he lost his right of rejection. (3) As to the claim for damages, they were not entitled to treat this as a breach of warranty entitling them to set off damages against the pursuers' claim for price. The words “material part” in section 11, sub-section 2, could not be read as meaning “any part,” and accordingly the remedy provided in that section did not apply here. But assuming that it did, the defenders, by electing to exercise their right of rejection, had lost any right to the alternative remedy of damages. Moreover, they would in no case be entitled to claim for damages after the time when they became aware, or ought to have become aware, of the defects in the dynamo— Wilson v. Carmichael & Sons, March 20, 1894, 21 R. 732. If any damages were due, the true measure of them was the difference between the contract price and the price of a new machine which would have done the work satisfactorily. There was no principle in the method by which the Lord Ordinary had assessed the damages as equal to the price of the machine. Argued for respondent—(1) There had been here a breach of a “material part” of the contract, and the defenders were accordingly entitled, in terms of section 11, sub-section 2, either to reject or to claim damages. (2) The defenders had validly exercised their right of rejection, and the fact of their using the machine was not in any way inconsistent with the pursuers' rights of ownership. The common law was not as stated by the pursuers on this point. The case of Chapman only applied to fungibles, the use of which implied destruction of a certain part, not to the case of machinery built into a purchaser's premises. The retention of such a subject, as authorised by section 36, necessitated its being used. The defenders had fully complied with the provisions of that section by intimating rejection. Nor was their right of rejection defeated by the fact that the machine had been in the possession of a third party— Magistrates of Glasgow v. Ireland & Son, June 27, 1895, 22 R. 818; Roberts & Company v. Yule, June 24, 1896, 23 R. 667. (3) Failing rejection, they were entitled to treat the disconformity as a breach of warranty giving rise to a claim for damages which might be set off against the price in terms of section 53. Warranty in Scotland was merely a condition of sale, and that being so, even if it were not a “material part” in the sense of section 11, the defenders had the right to claim damages. Accordingly, if the Court held that they had failed to adopt the first remedy of rejection provided by section 11, the fact of their having unsuccessfully attempted it ought not to bar them from using the second method, viz., damages for breach of warranty.
At advising—
The dynamo was intended for the use of a customer, Mr George Latimer, in his place of business, Lothian Road, Edinburgh. Mr Latimer was dissatisfied with the dynamo first supplied to him (October 1894); this was taken back, and another dynamo was supplied in February 1895. In consequence of complaints as to its performance, a new armature was afterwards supplied. I mention these particularly, because it is fair to the pursuers to keep in view that they gave due attention to the defenders' demands so long as these amounted only to a requirement that the machine should be made complete and put into good order, and did not take the shape of a claim to reject or rescind the contract of sale.
I pass from the admitted facts of the case
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It is common ground that every dynamo which has been run for two or three hours suffers a certain diminution of the electromotive force produced, and if it is not admitted, I think it is proved as a scientific fact that this effect is greater when the machine is worked up to the limit of its powers than it would be if a more powerful machine were substituted which could be run with less strain and at a lower speed. The Lord Ordinary in his analysis of the evidence has given weight to the view of the defenders' witnesses on this subject, which is to the effect that the fall in voltage ought not to exceed from 2 or 3 volts in the 100, and that a fall of from 8 to 10 per cent. is altogether excessive. I think it is perfectly plain that so considerable a fall as 8 per cent. would be incompatible with good lighting, unless the downward tendency could be corrected in some way. This is not seriously disputed by the pursuers; but their answer is, that the defenders, when they ordered a No. 3, which is a small machine, knew, or must be taken to know, that the voltage could not be depended on, and that their remedy was to increase the speed of the dynamo when the voltage fell.
As a matter of fact, I have no doubt that the explanation given by the pursuers is correct, and that the cause of the faulty performance is that the No. 3 machine was not equal to the work required; and again, I do not doubt that by “speeding-up” the engine from time to time the voltage might be restored to the proper standard. It is not said that this was not in fact done. But this observation is not an answer to the defenders' objections; and, as already indicated, I think that the pursuers having undertaken to supply a machine producing 115 volts, at a speed of 1100 revolutions a minute, are not excused by saying that what they promised was impossible with a machine of the given size and pattern. It was open to them to decline the order if they were unable to execute it as given, and in my opinion they do not fulfil their contract by supplying a machine which deviates from the prescribed electro-motive force by a greater percentage than is usual in the case of machines supplied by good makers. It follows that if the defenders, or their customer Mr Latimer, had taken proper measures for putting an end to the contract of sale they would have been within their rights.
I now come to the consideration of the legal aspects of the case, and I may begin by saying that I shall assume for the purposes of the argument that the defenders' letter to the pursuers, of date 14th September 1895, amounts to an unqualified rejection of the dynamo. I shall also assume that the rejection in the month of September of a machine which was delivered in February, and whose defects had been manifest to the defenders from the beginning did not come too late. I am not giving a legal opinion in that sense. I only assume for the purposes of argument that the rejection did not come too late. Under the Sale of Goods Act it is not necessary that the buyer should return the goods; it is enough that he intimates his rejection, and that he holds the goods at the disposal of the seller. But the Act of Parliament does not say that a buyer may reject the subject of sale and go on using it as if it were his property. It would be a very strange theory of law which should give rise to such a result, because it amounts to this, that when a buyer has an imperfect machine or article of any kind supplied to him, if he only goes through the form of a rejection, he may continue to use the article as long as he pleases without paying for it.
Now, the rejection of the subject of sale by a buyer is in legal effect a rescission of the contract of sale on the ground of the seller's non-performance or imperfect performance of his obligations. But if a purchaser claims right to rescind the contract of sale, he must, of course, be prepared to make reasonable restitution—that is to say, if he cannot restore the goods altogether unimpaired by use, he must at least do nothing subsequent to the rescission which would injure or affect their saleable quality.
But it is admitted that the defenders' sub-vendee (who in this question I identify with the defenders) has continued to use the dynamo just as if he had accepted it in fulfilment of the contract. This use was in fact continued from 14th September, the date of the nominal rejection of the dynamo, down to and after the raising of the action in December 1895. It is not necessary to consider the case of such a slight or temporary use of the article as might be taken by a buyer consistently with a bona fide intention of rejecting it, because we are here dealing with a case of use continued for three months, and following on a longer use while the machine was under trial. Now, as the sale of goods is regulated by Act of Parliament, I must say that in my opinion, when the Act speaks of the buyer's right of rejection, this must be taken to mean a rejection according to known legal conditions, one of which is that the buyer must not break bulk further than is necessary, or use or consume the article in the case of goods sold for use or consumption.
It is hardly necessary to quote authority on a point which is so well understood. But this condition of the right of rejection is laid down by Bell in the Principles, sec. 99, nearly in the words which I have used, and it is fully recognised in the opinions of the
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If in this case the sellers had assented to the rejection of the dynamo, and had agreed to take it back, the contract would then have come to an end, and any subsequent detention and use of the machine by the buyer could only give rise, as I conceive, to a pecuniary claim. But the makers did not in fact assent to the proposed rejection of their machine, and the validity of the rejection could only be determined by subsequent agreement, or by the decision of a court of law.
Now, I consider that pending a decision as to a buyers' claim to reject, the goods must be treated as if in neutral custody, and this whether the buyer be himself the custodier (as he may be under the Act of Parliament), or whether he places them in the custody of a third party. The condition that the buyer does nothing in relation to the goods which is inconsistent with the ownership of the seller, is in my opinion, especially applicable to the period when the parties are at issue as to the determination of the contract, and this view receives indirect confirmation from the language of the 35th section, where the doing of an act which is inconsistent with the seller's ownership is declared to be equivalent to the acceptance of the goods.
The importance of maintaining the integrity of the principle has led me to dwell on the qualification which the law attaches to the buyer's right of rejection at perhaps unnecessary length. I must now examine more closely the Lord Ordinary's ground of judgment.
The Lord Ordinary has sustained the defender's second and third pleas-in-law. Now, these pleas appear to me to be inconsistent, and only capable of being maintained as alternative propositions; because the second plea affirms that the pursuers have failed to implement their contract, and as a consequence, that the defenders are not liable in payment of the price; while the third plea amounts to a claim to set off the damages for breach of contract against the price. Now, under the statute (sec. 53), it is only where there is a breach of warranty by the seller that a claim of damages may be set up in extinction or diminution of the price. The reason of this is evident; if the goods are rightly rejected, the price is not due, and no question of compensation or set-off can arise. Without dwelling further on this point, it may be well to consider whether the defenders are in a position to treat the case as one of breach of warranty. By the 11th section of the statute it is provided that in Scotland “Failure by the seller to perform any material part of the contract of sale is a breach of contract which entitles the buyer, either within a reasonable time after delivery to reject the goods and treat the contract as repudiated, or to retain the goods and treat the failure to perform such material part as a breach which may give rise to a claim for compensation or damages.”
Under this enactment the common law of Scotland is radically altered, but it is not made identical with the law of England. Why this change should have been made I do not know, but we have nothing to do with the policy of the statute. The clause as it stands gives the buyer an unqualified right of election either to treat the contract as repudiated, or to affirm the contract and put forward a claim in diminution of the price; but the clause does not entitle the buyer to do two inconsistent things. In this case I conceive that the defenders made their election on 14th September 1895 to treat the contract as repudiated. They are not in a position to found on their election, because they have taken the use of the dynamo; but having made their election, and thus raised the issue which this action is brought to settle, the defenders, in my opinion, are not entitled to recal their election and to set up a claim as for breach of warranty. The introduction of breach of warranty into the case is a contribution by counsel, who were probably right in thinking that the case should have been so treated from the beginning. But I can find no trace of such a claim in the evidence or the correspondence subsequent to 14th September, which is the actual date on the point of election.
I ought to add, that even if the election had been different, I could not agree with the Lord Ordinary that damage is proved equal to the price of the machine. The evidence only establishes a certain amount of inconvenience experienced by the buyer in the use of the machine, and I cannot admit that a buyer who has the means of supplying himself with an efficient machine by purchase is entitled to go on using the defective article until he has set up an amount of damage which is sufficient to extinguish the price. The question may arise in other cases, and I should desire to reserve my opinion upon it. On the main question I am of opinion that the Lord Ordinary's judgment should be recalled and decree granted for the price.
On this ground I am of opinion that the defenders might have rejected the machine and refused payment of the price had they not retained it in their possession and continued to use it as their own for so long a time as to preclude their afterwards rejecting it. But I agree with your Lordships, for the reasons that have been already given, that it is now too late for them to repudiate the contract.
I am, however, unable to concur in the opinion that they are also deprived of the alternative remedy given by the statute to
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Your Lordships hold that it would be unjust to allow the defenders, who have received a part of the consideration, for which they contracted, to keep the machine and pay nothing because the contract has not been fully performed. I think the statute enables them in these circumstances to treat the condition which has been broken as if it were a warranty or independent agreement giving rise to a claim for damages, and to set up their claim for damages against the sellers in diminution or extinction of the price. On this point, therefore, I agree with the Lord Ordinary. I have some doubt, however, whether the amount of the damages has been satisfactorily made out. The damage claimable for breach of one condition would not necessarily be the same as for the breach of the entire contract. I presume that the claim should be measured by the difference between the value of the machine actually supplied, and the value which it would have had to the defenders if it had been in all respects conform to contract. I think the evidence upon this point is not altogether satisfactory, but it is a point upon which I should not be disposed to differ from the Lord Ordinary if we were to adhere to his interlocutor.
As your Lordships are of opinion that the interlocutor should be recalled, it is unnecessary to consider it further, since my opinion will have no effect upon the judgment.
The
Lord President and
The Court pronounced the following interlocutor:—
“The Lords having considered the reclaiming-note for the pursuers, the Electric Construction Company, against the interlocutor of Lord Low, dated 18th June 1896, and heard counsel for the parties, Recal the said interlocutor, and decern in favour of the pursuers in terms of the conclusions of the summons: Find the pursuers entitled to expenses, and remit the account thereof to the Auditor to tax and to report.”
On February 7th, on counsel for pursuers moving for approval of the Auditor's report, the defenders objected on the ground that while there had been a general finding for expenses in favour of the pursuers, they had failed on one part of the case, viz., the proof. They moved, accordingly, to remit to the Auditor with directions to allow them expenses on that part of the case—A. S., July 15, 1876 (General Regulations).
Argued for pursuers—The objection was too late, and should have been taken at the time when expenses were allowed— Welsh v. Russell, May 19, 1894, 21 R. 769; Murray v. Macfarlane's Trustees, November 6, 1895, 23 R. 80.
Lord President—The Court are of opinion that the objections come too late.
The Court repelled the objection, and approved of the Auditor's report.
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Counsel for Pursuers— Salvesen— Constable. Agents— Wallace & Pennell, W.S.
Counsel for Defenders—Sol.-Gen. Dickson— Clyde. Agent— Richard Johnstone, S.S.C.
